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The Great Transition: a Tale of How It Turned out Right

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The Great Transition: a Tale of How It Turned out Right The Great Transition nef is an independent think-and-do tank that inspires and demonstrates real economic well-being. We aim to improve quality of life by promoting innovative solutions that challenge mainstream thinking on economic, environmental and social issues. We work in partnership and put people and the planet first. nef (the new economics foundation) is a registered charity founded in 1986 by the leaders of The Other Economic Summit (TOES), which forced issues such as international debt onto the agenda of the G8 summit meetings. It has taken a lead in helping establish new coalitions and organisations such as the Jubilee 2000 debt campaign; the Ethical Trading Initiative; the UK Social Investment Forum; and new ways to measure social and economic well-being. The Great Transition A tale of how it turned out right Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist. Kenneth Boulding, economist Contents Foreword 1 Executive summary 3 A tale of how it turned out right 9 PART 1: WHY WE NEED A GREAT TRANSITION 13 Rediscovering the purpose of it all 14 The big challenges: why we need a Great Transition 17 PART 2: THE GREAT TRANSITION 35 The Great Revaluing 36 The Great Redistribution 40 The Great Rebalancing 44 The Great Localisation and Engagement 56 The Great Reskilling 67 The Great Economic Irrigation 77 The Great Interdependence 85 Two big remaining challenges 90 How to take the first steps 94 Appendix 1: Climate change targets 99 Appendix 2: Individual value 101 Appendix 3: Social value of greater equality 103 Appendix 4: Climate change scenarios 108 Endnotes 111 Foreword Humanity appears caught in a trap with no way out. ‘Business as usual’ is no longer an option. However, halting and reversing our consumption of more and more ‘stuff’ appears likely to trigger a massive depression with serious unemployment and poverty. This is certainly true if all we do is ‘apply the brakes’ without fundamentally redesigning the whole economic system. We are facing a series of interlinked systemic problems – consuming beyond our planetary limits; untenable inequality; growing economic instability and a breakdown in the relationship between ‘more’ and ‘better’. The only way to overcome these systemic problems is through a set of solutions which themselves address the whole. In this report we have sketched out how, in the light of these challenges we face as a country and as a world, things could ‘turn out right’ by 2050. We have focused particularly on the UK, but many of the solutions we outline apply globally. We have called the process by which this could happen the Great Transition as a deliberate echo of The Great Transformation, written by Karl Polanyi in the 1940s.1 While in a relatively short report such as this we could not hope to achieve anything remotely comparable to Polanyi’s great work, the scale of the change we need to see is at least the equal of the changes he described. Polanyi analysed how market processes in the industrial revolution had created severe ruptures in the fabric of social life, and argued strongly that we needed to reverse this and find a balance between the market and the non-market; the private and the public; the individual and the community. We couldn’t agree more, and the need to achieve this is all the more pressing now given the huge environmental problems we face, problems that Polanyi could not have foreseen in 1944 when the world was caught in the bloody conclusions of the Second World War. The most pressing problem facing humanity now is how to share scarce planetary resources in ways that are just, sustainable and support the well-being of us all. What we have tried to do in this report is to set out how the balance Polanyi sought might be achieved in a modern context, particularly how this could be done in a way 1 The Great Transition that safeguards the natural environment; where we live more in harmony with nature and within the ‘carrying capacity’ of our planetary resources. We have named the key areas where the Transition has to happen. While the detail may change, we hope to show with this report that it is possible to envisage a just society where good lives do not have to cost the Earth, and to identify the levers of change that would need to be pulled to start the journey to this society. A different future is not just necessary, it is also possible. Stewart Wallis, Executive Director, nef (the new economics foundation) 2 Executive summary This report argues that nothing short of a Great Transition to a new economy is necessary and desirable, and also possible. Business as usual has failed. Yet prime ministers, finance ministers and governors of central banks are still running around – perhaps a little less frantically than they were – trying to allay fears and convince us that this is not the case. The genie is out of the bottle though, and it is hard to see how it can be put back in. The financial crisis exposed deep flaws in the approach to economics that has dominated policy-making for a generation. It turns out that letting markets rip does not always lead to the best outcomes for societies. Government intervention, far from being inherently inefficient, turned out to be essential to prevent system-wide collapse. A return to blind faith in markets to deliver a future of endless, rapid growth is impossible to imagine now. This promise was always illusory, even on its own terms. Economic liberalisation has not delivered rapid growth on a consistent basis, but has been characterised by booms and crashes. Fewer and fewer have benefited from the booms as wealth and incomes have become increasingly concentrated, while those who suffered most from the crashes saw few if any benefits in the good times. Inequality has risen to record levels in many developed countries – not much has been ‘trickling down’. But the promise was also an illusion at a more basic level. Essentially, orthodox economic theory assumes the infinite consumption of finite resources. Growth, in the sense of using more and more stuff, is obviously impossible when there is only a certain amount of stuff. We can use what we have more efficiently of course, but this, too, has hard limits. The world is warming. The atmosphere cannot absorb the levels of CO2 being pumped into it for much longer without triggering irreversible climate change. The majority of the planet’s ecosystems are being pushed to breaking point. Our ‘footprint’ in the developed world has grown too heavy, and we are showing no signs of our being able to tread more lightly. 3 The Great Transition Measures of life satisfaction in developed countries are flat. Overwork for many combines with widespread worklessness for others. Set alongside those who have far more than they need are those who do not have enough. Falling social mobility sees these patterns repeated from one generation to the next, while unsustainable levels of debt affect all parts of society. As real incomes have fallen, many have had to take o n debt to fund the essentials of life. For the more affluent, status-driven consumerism, often fuelled by debt, is the norm. We can’t afford to carry on as we are Restoring business-as-usual – if such a thing is even possible – won’t make us happy, and it will cost us dearly. This report forecasts that in the period to 2050 the cumulative cost associated with climate change will range from £1.6 and £2.6 trillion, while the cost of addressing social problems related to inequality will reach £4.5 trillion. We appear to be locked into this state of affairs, but are we really? It can still turn out right We think that there is an alternative; one where we live within the limits of the natural world and more fairly with each other, locally, nationally and globally; where we focus on the things that really matter, applying our core human values to what is really valuable. We estimate that the measures proposed in this report would create up to £8.65 trillion of environmental and social value in the period to 2050. This won’t just happen. It requires us to rethink much of what we have taken for granted. As the well-off consume less, headline indicators such as GDP will have to fall by as much as a third, but we can grow ‘real value’ at the same time. By 2050, this increase in value would far exceed the fall in GDP, which is a very poor measure of ‘progress’ in any event. Rapid decarbonisation that moves toward global fair deal limits will avoid between £0.4 and £1.3 trillion in environmental costs. A progressive redistribution of incomes to reach Danish levels of equality will cut the costs of inequality-related social problems and increase social value by £7.35 trillion. By sharing our resources more equally, by building better communities and a better society and by safeguarding the natural environment, we can focus on the things that really matter and achieve genuine and lasting progress with higher levels of well being. Taken together this would amount to what we have termed the Great Transition. 4 Executive Summary The Great Transition: in detail In the first part of this report we make the case for change. In Part 2 we sketch out some of the steps we would need to take to make a reality of the Great Transition.
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